Oct NY world sugar #11 (SBV23) on Tuesday closed -0.29 (-1.10%), and Dec London white sugar #5 (SWZ23) closed -7.40 (-1.03%). Sugar prices continued their decline on Tuesday, reaching a two-week low, driven by increased sugar production in Brazil, reported Barchart.
According to Unica, sugar output in Brazil’s Center-South region during the first half of September rose by 8.54% compared to the previous year, totaling 3.116 million metric tons. Additionally, sugar production for the 2023/24 crop year through mid-September increased by 18.7% year-on-year, reaching 29.258 million metric tons. This surge in production was accompanied by an increase in the proportion of crushed sugarcane used for sugar production, rising to 49.37% this year from 45.47% the previous year.
The weakening Brazilian real also contributed to the bearish sentiment in sugar prices, as the real dropped to a two-week low against the US dollar on Tuesday.
Despite the rise in sugar prices driven by concerns about reduced global sugar production, sugar prices remained up due to the speculations that India may announce export restrictions on its sugar supplies. India’s sugar crop was adversely affected by a lack of monsoon rain, with a below-normal monsoon from June to August. India’s food ministry is expected to make a final decision on sugar exports for the 2023/24 season once total production estimates become available. In the current 2022/23 season, India allowed the export of only 6.1 million metric tons of sugar until September 30, compared to a record 11.1 million metric tons in the previous season. The Indian Sugar Mills Association (ISMA) forecasted a 3.4% year-on-year decline in India’s 2023/24 sugar production to 31.68 million metric tons on August 2.
Smaller sugar output from Thailand, the world’s second-largest sugar exporter, has created a bullish sentiment in the market. Thailand’s projection of a -18% year-on-year decline in sugar production to 9 million metric tons for the 2023/24 season is primarily due to a severe drought.
However, there are negative factors affecting sugar prices as well. Reduced demand from China is one such factor, with China’s sugar imports in August plummeting by -46.4% year-on-year to 370,000 metric tons. Additionally, the strong sugar output in Brazil is contributing to bearish sentiment. Brazil’s favorable weather conditions have led to an increase in sugarcane yields, causing Conab to raise its 2023/24 sugar production estimate to 40.9 million metric tons.
Another factor to watch is the potential impact of an El Nino weather pattern, which could disrupt global sugar production and add a bullish element to the market.